Federal Circuit: USPTO can overturn patent in reexamination even after a court refuses to do so

A recent Federal Circuit decision ruled that the U.S. Patent and Trademark Office (USPTO) may overturn a patent in a reexamination proceeding, even after a district court has refused to find the patent invalid. In In re Baxter International Inc. (No. 2011-1073, en banc 10/26/12), the Court found that such a result is especially possible in situations where the USPTO considered prior art that was not present in the district court proceeding

The case involved a patent covering hemodialysis machines that are integrated with a touch screen user interface. The touch screen interface allows a user to monitor and change treatment parameters that are pertinent to operation of the machine. One of the patent holder’s competitors, Fresenius Medical Care, filed a declaratory judgment action in which it asked the U.S. District Court for the Northern District of California to declare the patent invalid. The court denied Fresenius’ request and instead found that Fresenius failed to show by clear and convincing evidence that the prior art included all limitations of the patent’s claims. On appeal, the Federal Circuit affirmed the district court’s decision, although for slightly different reasons.

In parallel with the lawsuit, Fresenius provoked a reexamination of the patent at the USPTO. The reexamination proceeding included the prior art that the district court considered when it upheld the patent, along with additional prior art. In the reexamination proceeding, the USPTO reached the opposite conclusion, finding the patent to be invalid.

The patent holder appealed and ultimately petitioned the USPTO director to vacate its invalidity finding in view of the Federal Circuit’s opposite conclusion. The director denied the petition but ordered the Board of Patent Appeals and Interferences to reconsider the rejections in view of the court’s decision. The Board affirmed the rejections, stating that:

a lower standard of proof and the broadest reasonable interpretation standard of claim construction apply at the PTO and therefore the agency is not bound by the court’s determination.

On appeal, the Federal Circuit affirmed the USPTO’s decision, noting that USPTO reexamination proceedings and court proceedings “take different approaches in determining validity and on the same evidence could quite correctly come to different conclusions.”

Specifically, the Federal Circuit explained that in a reexamination proceeding, the USPTO considers whether a preponderance of the evidence shows that the patent claims should be overturned. No presumption of patent validity exists in a reexamination proceeding. In contrast, in a court proceeding the patent is presumed to be valid, and to overturn a patent the challenger must prove invalidity by the higher clear and convincing evidence standard. If the challenger fails, the court will not find the patent “valid,” but instead will simply find that the challenger did not meet its burden of establishing invalidity in the particular case before the court.

The Court acknowledged that its decision could be viewed as “erroneously elevating a decision by the PTO over a decision by a federal district court.” However, the Court addressed this concern by stating that “the PTO ideally should not arrive at a different conclusion” where the same facts and arguments are presented in both venues. In the case at hand, the Court noted that the reexamination proceeding included additional prior art that was not addressed in the court proceedings.

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